Kenai Peninsula Borough Mayor Dave Carey gave his own version of a "state of the borough" address, emphasizing the importance of human and natural resources while discussing upcoming budget challenges, at the Soldotna Chamber of Commerce's luncheon at Froso's Tuesday.

"The state constitution says we are a resource development state and we're here to develop wisely the resources of the state," Carey told the crowded banquet room. "We've got to get some things moving."

Some of those things include capitalizing on the proposed Pebble Mine, the Chuitna Coal project, and a possible fast ferry system across Cook Inlet, as well as exploring geothermal energy from the volcanic Mount Spurr, he said.

He also stressed the importance of further oil and gas development, like exploring drilling in Cook Inlet with a possible jack-up rig, the Cook Inlet Natural Gas Storage facility in Kenai and natural gas on the Southern Peninsula.

"As we look ahead to the Kenai Peninsula Borough there are numerous things available as we make our move," he said.

These sorts of resource development projects are what could help continue to fund the borough's government and help it stay on top of finances and out of debt.

Carey said the largest issue the borough has been working on as it looks to the future is the $12 million close-out of Homer's solid waste transfer site.

It's still a top priority for the borough to get state and federal assistance on this project, he said, something that is critical for the borough's budget.

Carey said the borough could not survive without state and federal assistance, like the grant funding for schools and roads, among other things. For the past few years government grant funding has been around $15 million for the borough.

But, he said, "I do not believe we can rely upon others to fund the government we're dedicated to doing."

The primary sources of borough income and subsequent funding abilities come from property and sale taxes, he said.

For fiscal year 2010 the borough collected a total of $58.4 million in those taxes -- $30.2 million for property taxes and $28.2 for sales -- at a 4.50 mill rate and 3 percent sales tax, with non-prepared foods exempt between Sept. 1 and May 31.

For fiscal year 2011 the borough collected $30.3 million in property tax and $27.8 million in sales tax at the same rates for a total of $58.1 million.

"Sales tax is absolutely dedicated to our schools," Carey said. And the rest is pretty much dedicated to solid waste.

He said that if the borough's contributions to schools and solid waste were combined it would equal 3.99 mills, which leaves the borough .51 mills for the rest of its government funding.

"I don't think people understand how much we spend on solid waste," he said.

In order to ease the funding talks with the Kenai Peninsula Borough School District, Carey said he hopes to have an early decision made on the borough's funding of the schools this year. He characterized last year's school budget process as a contentious battle with the assembly.

"We very much hope by the end of February assembly will make an informal decision so contracts can be given out," he said.

The fiscal year 2012 budget will be based on similar numbers from the previous two cycles, Carey said.

"We will have a flat budget presented to the assembly," he said.

"If I was speaking today about an increase to borough tax or the mill rate I believe I would get hung," he added later.

With inflation, presenting an exact status quo budget is a 4.5 percent decrease from last year, according to Carey.

In preparing for upcoming budget cycle, Carey said he is having all borough departments present optional budgets to him with an even further 3 percent decrease to the "status quo."

Maintaining the borough's $19 million fund balance is going to be another budgetary issue the Kenai Peninsula Borough Assembly will be faced with.

Some of it could be used to fund the Homer's landfill closure. Another possibility, which the mayor previously talked about, is a bond issue to fund the $12 million landfill closure but at the luncheon Tuesday Carey did not seem keen on the bond issue idea.

He said the borough is looking into other ways to develop its resources in order to stay afloat in the rapidly indebted global economy.

"We're certainly going to look at where we can reduce our budget," Carey said.

While Carey said he was very concerned about what the federal government is going to do to stop racking up debt, he also said he was "extremely optimistic about the future of the Kenai Peninsula Borough."

Brielle Schaeffer can be reached at brielle.schaeffer@peninsulaclarion.com.